Facebook Gets Price Target Bump Based On Ad Strength

A strong outlook for online advertising revenue growth prodded Nomura Securities to become the latest investment bank to raise its price target on Facebook (FB).

Nomura analyst Anthony DiClemente said in a research note Friday that the Thursday launch of video ads on Facebook, combined with ad acceleration in mobile and the ability to more accurately target consumers, sparked his price target increase.

DiClemente, who has a buy rating on Facebook, raised his price target to 84 from 78. Facebook stock was down 1%, near 68, in midday trading in the stock market today.

Facebook stock hit an all-time high of 72.59 on Tuesday, when its stock price target was raised to 85 from 79 by Citi Research. Citi also hiked its price target largely on expectations of growing strength in the video ad market. Citi analyst Mark May sees video ads on Facebook generating revenue of $261 million this year and $1.6 billion in 2018.

May also forecasts revenue from Instagram ads rising from $174 million in 2014 to $2.3 billion in 2018, as IBD reported.

Facebook began rolling out its long-awaited video ads Thursday, starting with a select group of advertisers. The 15-second spots are designed for advertisers that want to reach a large audience with high-quality sight, sound and motion, as IBD reported.

DiClemente said the premium video ads should further narrow the gap between Facebook and TV ad pricing.

In the past, as digital advertising platforms have matured, ad prices have come down under pressure due to increased supply. But that has not been the case at Facebook.

"Historically, most Internet ad formats have not enjoyed sustainable pricing power given their seemingly infinite supply," he wrote. "This makes it all the more notable that Facebook's average price per ad has accelerated each of the past four quarters."

In Q4, Facebook reported the number of ads delivered fell 8% from the year-ago period, but the average price per ad rose 92% in that time frame. Facebook wanted to place an emphasis on ad quality, rather than ad quantity. There is also plenty of room for ad revenue growth in the mobile field, DiClemente said.

A strong outlook for online advertising revenue growth prodded Nomura Securities to become the latest investment bank to raise its price target on Facebook (FB).

Nomura analyst Anthony DiClemente said in a research note Friday that the Thursday launch of video ads on Facebook, combined with ad acceleration in mobile and the ability to more accurately target consumers, sparked his price target increase.

DiClemente, who has a buy rating on Facebook, raised his price target to 84 from 78. Facebook stock was down 1%, near 68, in midday trading in the stock market today.

Facebook stock hit an all-time high of 72.59 on Tuesday, when its stock price target was raised to 85 from 79 by Citi Research. Citi also hiked its price target largely on expectations of growing strength in the video ad market. Citi analyst Mark May sees video ads on Facebook generating revenue of $261 million this year and $1.6 billion in 2018.

May also forecasts revenue from Instagram ads rising from $174 million in 2014 to $2.3 billion in 2018, as IBD reported.

Facebook began rolling out its long-awaited video ads Thursday, starting with a select group of advertisers. The 15-second spots are designed for advertisers that want to reach a large audience with high-quality sight, sound and motion, as IBD reported.

DiClemente said the premium video ads should further narrow the gap between Facebook and TV ad pricing.

In the past, as digital advertising platforms have matured, ad prices have come down under pressure due to increased supply. But that has not been the case at Facebook.

"Historically, most Internet ad formats have not enjoyed sustainable pricing power given their seemingly infinite supply," he wrote. "This makes it all the more notable that Facebook's average price per ad has accelerated each of the past four quarters."

In Q4, Facebook reported the number of ads delivered fell 8% from the year-ago period, but the average price per ad rose 92% in that time frame. Facebook wanted to place an emphasis on ad quality, rather than ad quantity. There is also plenty of room for ad revenue growth in the mobile field, DiClemente said.

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